Briefly:
Intraday trade: The S&P 500 index lost 2.1% on Monday, after opening 0.4% lower. The market will probably open slightly higher today. We may see a short-term upward correction.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.
Our short-term outlook is neutral, and our medium-term outlook is neutral:
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral
The U.S. stock market indexes lost another 2.1-2.3% on Monday, as investors' sentiment worsened again. The S&P 500 index fell 14.0% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 2.1% and the Nasdaq Composite lost 2.3% on Monday.
The nearest important level of resistance of the S&P 500 index is now at 2,580-2,600, marked by the recent level of support. The resistance level is also at 2,635-2,640, marked by Friday's daily gap down of 2,635.07-2,637.27. On the other hand, the support level is at 2,490-2,500, marked by some last year's fluctuations.
The broad stock market broke below its two-month-long trading range yesterday, as the S&P 500 index fell below the recent local lows. The downward correction reached 14% from the September all-time high, surpassing January-February correction of around 12%. Is this a long-term bear market? For now, it looks like a medium-term downward correction. However, there have been no confirmed positive signals so far. The index fell close to the February local low, as we can see on the daily chart:
Slightly Positive Expectations, Just Upward Correction?
The index futures contracts trade 0.4-0.5% above their Monday's closing prices. So expectations before the opening of today's trading session are slightly positive. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements this morning: Building Permits, Housing Starts at 8:30 a.m. Investors will also wait for tomorrow's Fed's Rate Decision release. The broad stock market will likely retrace some of its yesterday's sell-off today. But we may see another wave of selling later in the day. There wlll likely be an increased volatility following the recent big declines.
The S&P 500 futures contract trades within an intraday consolidation following the recent sell-off. The nearest important level of resistance is at around 2,570, marked by the local highs. The resistance level is also at 2,590-2,600. On the other hand, the level of support is at 2,530-2,550. The futures contract trades below its short-term downward trend line, as the 15-minute chart shows:
Nasdaq Also Slightly Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market broke below its previous medium-term low yesterday, as it reached 6,400 mark. The nearest important level of resistance is now at around 6,550-6,600. On the other hand, the support level is at 6,400-6,450, among others. The Nasdaq futures contract trades along 6,500 mark this morning, as we can see on the 15-minute chart:
Apple, Amazon - Lower
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its sell-off yesterday, as it fell slightly below the previous Monday's local low. The market reached new medium-term low of $162.73. Will it continue lower? It looks like some bottoming pattern before an upward reversal. However, there have been no confirmed positive signals so far:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The stock bounced off the resistance level of $1,700-1,800 again, and it got closer to the support level of $1,450-1,500. It continues to trade below the two-month-long downward trend line, as we can see on the daily chart:
Dow Jones - Breakdown Confirmed
The Dow Jones Industrial Average has also broke below its two-month-long consolidation. The blue-chip stocks' gauge fell below the support level of 24,000 yesterday. The nearest important level support is now at around 23,350, marked by some previous local lows. On the other hand, the short-term resistance level remains at 24,000-24,250, as the daily chart shows:
The S&P 500 index fell the lowest since the early November of 2017. It extended its downtrend, as it fell 14% off the late September local high. Is this a long-term bear market or just medium-term downward correction? For now, it looks like a correction. However, there have been no confirmed positive signals so far.
Concluding, the S&P 500 index will likely open slightly higher today. We may see an attempt at retracing some of the recent sell-off. Investors will wait for tomorrow's Fed's Rate Decision release.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
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